FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 2 Daniel White, Berkeley Research Group September 16, 2014 Challenges, Solutions Moving Forward with Cogeneration

FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 3 Been Here Before, Sort Of Before there was “climate”, there was “energy shortage”, “utility cost overruns”, “fireside chat” … and 1978’s PURPA PURPA opened the regulatory door for a market for non-utility power producers and particularly cogeneration New companies pursued cogen driven by the potential to sell power to utilities Local 1981 startup AES in 1986 was the largest IPP with 328MW from 3 plants, now 35GW and $16B annual revenues Cogeneration boomed through the 1990s With natural gas deregulation and pipeline open access in the 1990s gas began gaining ground as a power fuel

FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 4 Selkirk Cogen - Example Development began in 1980’s; 80MW Unit 1 COD 1992; 265MW Unit 2 COD 1994 Natural gas with oil backup. Steam to SABIC plastics (formerly GE) Two PPAs with different requirements for dispatch, fuel, availability, etc. Non-recourse financing High reliability Very profitable Selkirk Schematic

FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 5 Selkirk Cogen – Still Delivering Selkirk today continues to operate at high availability and efficiency, and profitably. Sells both merchant and contract power with ConEd PPA expiring this year. Weathered regulatory & market changes, ownership changes (incl. bankruptcy), industrial host change. 05/03/2014 A US cogeneration plant is threatened with shutdown due to leasing issues. The 345-MW gas-fired Selkirk Cogen plant in Bethlehem, New York could be mothballed in early September if its owners, Selkirk Cogen Partners, fail to negotiate a new land lease. The partnership has filed a notice with the New York Public Service Commission regarding the potential shutdown. Selkirk Cogen Partners told local paper the Albany Times-Union that the filing is required by the state to warn regulators that the plant may have to be shut if a new lease cannot be negotiated. High value to owners, host, community, market, and economy has been continuous. “There’s always something”

FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 6 Natural Gas Now Shale gas are the dominant drivers in energy markets US era of abundant and low-price natural gas – Lowers status quo fuel and power costs – But also lowers project fuel cost and fuel risk Technology advance offsetting drilling shift to oil shale Tremendous volume projections $$Billions of investment ongoing based on shale gas Reduced Gas Price & Volatility U.S. Dry Production (Tcf) Reference Case Overall price volatility is down. Major downturn in gas trading as a result Periodic pipeline related regional volatility being addressed by expansions

FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 7 Key Development Elements Power Heat Regulations & Mandates Climate Emissions Volume, price, flexibility, reliability What’s the value, tangible & social?Any risk acceptable? Contracts can be complex, multiple parties, multiple markets Parties have different investment time frames. What’s yours? What’s your view of future prices, GHG value, & technology change pace? Development Value Elements: EPA has an excellent intro process Development looks straightforward BUT THAT OFTEN PROVES NOT Heightened public service Value since Hurricane Sandy